Thought Leader: Dan Ariely

As part of the Carnegie Council Centennial Thought Leaders Forum, Carnegie Council's Devin Stewart spoke with Dan Ariely, an Israeli-American professor of psychology and behavioral economics. He teaches at Duke University and is the founder of The Center for Advanced Hindsight.

DEVIN STEWART: Dr. Ariely, it's so good to have you here today.

When you look at the world today, how do you see the world? How would you describe it, particularly from a moral perspective?

DAN ARIELY: I think morality has a few elements to it. It's a real struggle between what's good for me and what's good for other people. It's a struggle between what's good for me right now and what's good for me in the long term.

If you think about these struggles in this broader sense, I think it's becoming more and more challenging. One of the big challenges we have is the challenges of self control. Just ask yourself the question: Do you overeat, under-exercise? Don't save enough? Bite your nails? Scratch mosquito bites? Text and drive? All of those questions. We all do them. They are all a tradeoff between now versus later.

A very general way to think about this is that we care about now at the expense of later. Imagine I asked you a question and I said, "What would you rather have, a half a box of chocolate right now or a full box of chocolate in a week? Half now or full in a week?"

Faced with this thing, most people say, "Give me the half now." And they are basically saying, "It's not worthwhile for me to wait another week for another half a box of chocolate."

But imagine that I push the choice to the future and said, "What would you rather have, a half a box of chocolate in a year or a full box of chocolate in a year and a week?"

Now people say, "I'll be perfectly patient. No problem."

When things are far in the future, we have great ideas about what we would be. We will save and diet and not text and drive. The problem is that we become more and more tempted, and as we become tempted, we fail.

If you think about it, the commercial world around us is all about tempting us. What's the goal of Dunkin' Donuts? To make sure that you live healthy 30 years from now or to get you to eat another donut right now? What is the goal of Facebook? To get you to be more productive in 20 years or to get you to check Facebook a couple more times today?

We have this concept called choice architecture, which is the idea that people act in the world as a function of the environment in which they are being placed. The environment in which we're being placed is such that it tries to tempt us all day long with lots of things. I think, because of that, we fail in temptation more and more and more.

If you think, of course, about global warming, that's a classical problem for this problem between now and later. In fact, if you said, "Let's look the world over for the one problem that would maximize human apathy," it would be global warming. Why? It's long in the future, it would happen to other people first, we don't see it progressing, we don't see anybody suffering, and anything we are doing is a drop in the bucket. Can we as human beings care about what will happen? The answer is, it's really, really tough.

So I think we have a class of problems where we have the capacity to destroy civilization, destroy ourselves, destroy the planet, because what we're doing right now, selfishly, is not good for us in the long term. I think morality is one of those things. For each one of us, it might be good to cheat a little bit now for our immediate selfish motivation, but at the cost of deteriorating something like the social good or public trust and so on.

That is one big type of problem that concerns me. It concerns me because human nature is not designed to deal with the long term and it concerns me because I think that governments are not designed to deal with long terms. Governments have a very short time horizon, maybe with the exception of some totalitarian regimes that actually have a longer horizon.

The second thing I would say that is incredibly important now is the media. We live in a world in which some things become salient and part of the public discourse, and some things do not. What's interesting is that not all things have the same probability of becoming part of the public discourse.

As a simple example, imagine that I ask you the question: What are you more likely to die from, an airplane passing above and something falling from the airplane and hitting you on the head or from a shark attack?

Most people say shark attack, by a big margin. There's a movie on that. It turns out the airplane parts have a higher probability of killing you. There are more of them. But people don't know what's actually dangerous. They know what's salient in their minds.

Similarly, you can ask yourself, what does the media do to appropriate behavior and inappropriate behavior? Think about athletes doping, for example. You never see a headline saying, "This athlete was tested and found not to take any drugs." No. We only put in headlines things that are bad behavior or the extreme.

So you as an individual are trying to understand what the social norm is, and all you get from the media are symbols of people misbehaving and misbehaving and misbehaving.

Recently I got a letter from a physician who deals with lots of athletes. He said, because he is their physician, he knows exactly how many of them are doping. But he said that they believe that everybody is doping, because again there's this asymmetry. We hear lots of bad news; we don't hear good news. We think that's much more common than it is.

Another thing that is happening to us in the society is that the distance between us and our actions and us and other people is increasing and becoming more disintermediated. I'll tell you first a non-electronic version of this and then we'll come back to think about how it works in society.

We did a study with 12,000 golf players. We said, "Imagine your ball fell in the rough"—and the rough is a place where it's hard to hit from—"and you really, really wished it was four inches to the left. Would you pick it up and move it four inches?"

People say, "I can't imagine doing that." They actually were upset. They said, "You just don't understand golf. This is not what golf players do. You just don't pick up the ball and move it. It's against the rules. Nobody does it. It's immoral."

Then we said, "What about kicking the ball a little bit?"

"Yes, that seems reasonable. We've done it a lot. Other people do it all the time."

"What about hitting it with the club?"

"That's even easier."

Now, the consequence is the same thing. Nevertheless, we don't think that it's the same thing. Think about the difference between taking 50 cents from a petty cash box and taking a pencil from work home. Those feel very different.

There's a little joke. Little Johnny comes home from school with a note from the teacher that says that little Johnny stole a pencil from the kid who's sitting next to him. Johnny's father is just furious. He said, "Johnny, I'm embarrassed and humiliated. This is not how we raised you and educated you. You never, never, never steal a pencil from the kid who's sitting next to you. You're grounded for two weeks. And just wait until your mother comes home. Besides, Johnny, you know very well, if you need a pencil, just say something. Just ask. Just mention it. I can bring you dozens of pencils from the office."

If it's funny, it is because we do recognize this duality that some things we call stealing and some things not. And it's not because of the consequences. It's because of how we can obfuscate the relationship between what we do and what the outcome is.

This is golf and pencils, but if you think about the world, the world is becoming more distant. One of the experiments we did on this was to give people a sheet of paper with 20 simple math problems and we said, "Go ahead and solve as many of those as you can in five minutes. I'll give you a dollar per question."

People solved as fast as they could, as many as they could. When they finished, we said, "Okay, stop. Put your pencil down. Count how many questions you got correct. Now take the piece of paper, go to the back of the room, and shred it."

They shredded the piece of paper. We said, "Come back to the front of the room. Tell us how many questions you got correct and we'll pay you."

People said they solved six problems; we paid them six dollars; they went home. What the people in the experiment did not know was that we played with the shredder so the shredder shredded the sides of the page, but the main body of the page remained intact.

What really happened? People solved four and claimed to be solving six. Lots of people cheated just a little. But when we did the experiment with slight variations, after people shredded the piece of paper, they came to us, they looked us in the eyes, and they said, "Mr. Experimenter, I solved X problems. Give me X tokens." We paid them with pieces of plastic. They took these pieces of plastic, walked 12 feet to the side, and changed them for dollars.

In essence, what they were doing was they were lying for a pencil, but the pencil became money very quickly. What happened? Our participants doubled their cheating.

If you think about it, this is incredibly troubling, because it means that being one step removed from money for just a few seconds liberates people, to a large degree, from their moral shackles. What happens when it's more steps? What happens when it's for a longer term?

Think about moving from cash to credit cards to electronic wallets, from cash to stock to stock options to derivatives, from dealing directly face-to-face with somebody to dealing with people over a long distance. Could it be that our morality is invoked when we see things that are tangible? I see your eyes; something exchanges. But as things become more detached from money and more detached from people, we actually have an easier time to act immorally, but also to justify that.

Actually, there's another part I want to say that I forgot to talk about earlier when I talked about self-control.

When I think about the problem of self-control and now versus later, there's one very set analysis that impacted me the most when I heard it. The question was, what percentage of human mortality is caused by bad decision making? When you try to estimate, 100 years ago, what was the percentage of human mortality that was caused or aided by bad decision making, it was about 10 percent. A hundred years ago, how could you kill yourself with a bad decision? We had cars. We could do a few things.

When you look at it these days, it's likely more than 40 percent. Why? Because as we invent technologies, we also invent ways to kill ourselves. Think about diabetes and obesity and smoking and texting while driving. If you think about stuff like smoking and obesity and so on, it's not that each of those decisions you make is going to kill you, but we're creating a world, owing to temptation, that every small decision is slightly bad for you, but we have the opportunity to make a ton of them.

This is actually a way that we're moving toward which I think is incredibly dangerous, if we don't understand the risk we're going into and we don't think about how we curb our own instinct and how we create an environment that will not tempt us as much.

DEVIN STEWART: Fascinating.

Thinking about those three factors, the three big phenomena that you identified—self control, the effect of the media, and obfuscation or distance—would you say things are getting better or worse overall in the world today?

DAN ARIELY: I like to be an optimist. My job is to identify things that people do badly. It's a very depressing job if you think about it this way. My hope is that we can identify when we go wrong and use this power to try to think about what we could do better. I think the analysis, for example, of the role of obfuscation and dishonesty is incredibly important, but once we know it, we need to fight it.

I think the tendency of the capitalistic system is to get things to be more and more difficult. But the good news is that we're figuring out some of the big mistakes people are making, and if we figure out in time, we can try to fight that and actually do things in a better way.

There's a metaphor for human behavior that is taken from the elephant seals. The elephant seals live a very simple life. The elephant seal male basically wants as many of the females as he can get. It's winner-takes-all. The biggest elephant seal basically gets all the females. So if you are an elephant seal, what do you want to do? You want to be the biggest. If you're the second-biggest, not so good.

So what happens is, the elephant seals basically fight to become bigger and bigger and bigger. But they are so big right now that they have vascular problems and heart problems, and sometimes they crush the females when they copulate. If you think about it, when each individual in the system is trying to get slightly better and have a leg up, it can actually destroy the whole ecosystem.

Robert Frank has this incredible concept where he says that the father of capitalism and modern economic theory should be Darwin and not Adam Smith. [Editor's note: Check out Robert Frank's November 2011 Carnegie Council talk, "The Darwin Economy: Liberty Competition and the Common Good."] When you think about the invisible hand, you say if you give people the freedom to do whatever they will do, everything will be good. No. If you think about this biological system, with limited resources—like a limited number of females—and everybody is fighting, the fighting can actually devastate the whole ecosystem.

I think you could actually look at lots of parallels with this. You could think about individuals, not fighting with each other, but competing with each other for who has the biggest home and who can send their kids to better schools, and you can think about nations trying to have a leg up on other nations, and how this competition might not be actually good to create the invisible-hand perfect market, but can actually devastate the fundamentals of the economy.

DEVIN STEWART: Tomas Sedlacek, the Czech economist, said something very similar this morning. I guess today is the invisible hand day for us.

Part of what we're doing is exploring the notion of a global ethic. It means some things to some people and it means other things to other people. What does that mean to you, if anything?

DAN ARIELY: Global ethics is really interesting. One of the things I've been very interested in is cross-cultural differences in dishonesty and morality. We've taken a simple task. Our simple task is that people solve some problems, they shred the piece of paper, and then they report how many questions they got correct. It turns out that lots of people cheat a little bit. Very few people cheat a lot, but a ton of people cheat a little bit.

So we took this basic task and we went to different places. We said, how would cheating in different places look? We haven't done everywhere. We've done just a few places. We're planning to do more. But here is where we are currently.

I grew up in Israel, so the first country I wanted to test was Israel. We gave people in Israel the same task. What do you think? Did they cheat more or did they cheat less than the Americans? Just the same.

My Italian collaborator Francesca Gino said, "Come to Italy. We'll show you what the Italians can do."

We tried Italy. The Italians cheat just like the Americans.

We tried China. We tried Turkey. We tried England. We also tried Canada, because the Canadians always think that they're better than the Americans. They are not.

There are many more countries to test, but so far we have found no differences.

How can that be? All of us have traveled somewhere, have been in different kinds of cultures, and all of us have the subjective feeling that morality in different places feels very, very different. How come our experiments don't measure it?

Here's our current understanding of that. Our experiment—with a sheet of paper, with simple math problems—is not embedded in any culture. It's abstract. It is general. It's the first time that people see something. Because of that, our task measured the basic human ability to fudge, to be dishonest. It's basically the human ability of how much you can cheat and still think of yourself as a good person, and that doesn't vary across cultures.

Does this mean that cultures don't matter? No. Culture does matter. But what culture does is it works in a domain-by-domain-specific way, and it changes our understanding of how much dishonesty is acceptable in that particular domain.

For example, young people in the United States, if you ask them about illegal downloads—no problem whatsoever. Does that mean that they are immoral in terms of other things in life? No. But they have taken that particular domain and said, "You know what? This is not a domain that has anything to do with morality."

You look at another domain, like speeding. You say, "Oh, five miles over the speed limit, that's fine. Ten is really not, but five is."

Some people have expense reports. They say, "Oh, I can fudge a little bit on the drink, but I can't add too much."

So it's domain-by-domain-specific. Different countries have very different relationships to infidelity. Just compare the United States and France, for example. It's not that the French have a different overall morality than the Americans, but they took this one domain of infidelity and said, "We're just not that concerned about that." The Americans are incredibly concerned about it.

This is actually what I think corruption is all about. Corruption is all about taking a domain of life—bribing a policeman, city official, whatever it is—and basically saying, "You know what? We're going to go down a journey in which we'll think that everybody is doing the same thing and we will take that particular domain out of the moral domain. We know it's illegal, but we're not going to care about it. We're not going to feel embarrassed if we're caught. There will be a punishment, maybe, but we're not going to have any moral judgments about that."

When I think about global morality, I think the good news is that we're all very similar. The bad news is that, domain-by-domain specific, we can actually get very bad lessons from society around us about what is acceptable and not acceptable.

Imagine you're a banker. If you're a banker in the United States, the United States is part of your culture. It defines what is acceptable or not. But as we move to a global economy, could it be that you would look at bankers everywhere as your reference?

Think about politicians. If you're a politician in the United States, maybe you look at politicians in the United States as defining for you what you think is acceptable and not. But as you get broader and broader on that, it could change your understanding of what's acceptable.

One of the papers on this that I like the most is a paper that looks at representatives to the United Nations and how often they park illegally. If you're a representative to the United Nations, you can park illegally, and you're a diplomat, so you don't get any punishment. It's still disrespectful. You're still doing things that are not desirable. There's no consequence.

What it showed was that when people first come to the United Nations, the percentage that people do it correlates very well to the corruption index of Transparency International. Countries that are high on the corruption index—some countries in Africa, Saudi Arabia— they're also high in parking illegally. Sweden and other Northern Europeans countries are low on the corruption index and they don't indeed park illegally.

But what they also found was that as people stay longer in the United Nations, they gravitate toward the low end. Why? You come to the United Nations. You're influenced by the opinions of people from your home country. If you're from Sweden, you keep the standard of Swedish behavior. But then you start associating with other people from the United Nations, from other countries, which has a mix of people who behave well and behave badly. And you know what? The people who behave worse are more salient. Who do you see? You see the ones who are parking illegally. You gravitate toward it, and morality overall deteriorates.

DEVIN STEWART: Very interesting. I would think from my economics training that it would sort of harmonize in the middle.

DAN ARIELY: Remember that what you have is a selfish motivation to misbehave and you have morality that stops you. These two forces are competing. What happens? Your selfishness is still there, but all of a sudden the morality weakens, because you see other people are doing that. It's not a gravitation toward the middle. It's a selfish force. If you live in New York and you could park anywhere, that's a great deal, right?

What happens is that the thing that slows you down is slowly eroding. From that perspective, you can think about what happens if you have many countries and each of them is immoral in other aspects. Some countries don't care about taxes. Some countries don't care about something else. When you put them all together, would it be the case that everybody would start imitating the bad behavior of everybody and the consequence would be that everybody is just as bad as everybody else, but not really learning from the positive behavior?

DEVIN STEWART: Maybe you've answered this already, so you can pass this question if you would like. We ask everyone what you think the biggest moral challenge facing the planet is today. It sounded like you described that in your first answer.

DAN ARIELY: I can say it very quickly.

In my mind, the biggest moral challenge we have has to do with global warming. This is a really complex question. It's a question about now versus later. It's a question about collaboration between different nations. It's a question where we individually cannot do very much, but the collective action is incredibly important.

I know generally people don't think of it as a moral question. But it is a moral question. There is this amazing public good that we have. As individuals, we erode it; as countries, we erode it. The question is, how do we get to stop thinking about our own selfish motivation and start thinking about the overall goodness of the planet and future generations?

DEVIN STEWART: Perfect.

That leads me to my final question. It seems like you've done a lot of work that could help people think about how they can make a positive difference in the world and not feel overwhelmed as an individual. What advice would you give people to make a positive difference?

DAN ARIELY: One of the challenges in making a positive difference is what we call the drop-in-the-bucket effect. You say to yourself, "What can I do? The problems are huge. I can make a small difference."

Actually, in Jewish thought there's a statement that says if you save a single soul, it's as if you saved the whole world. It's not exactly these words, but it's like it.

I think it's a good sentiment to think about. If you think about the size of many of the problems, all of us would just be paralyzed and not do much. But if you shrink the problem and you say, "Let me just save one soul, one person right now," that's an incredibly important contribution.

So that's the first thing.

The second thing I would do is I would come to the recognition that every time we have to make a decision, there's a chance that we will fail. So what we want to do is create situations in which we're less likely to fail.

If I covered your desk every morning with donuts, there's a good chance you will weigh more at the end of the year—fresh donuts every morning. This is because the environment will have an effect on your behavior.

But you have actually a control over what environment you would want to live in. If you thought about how you want to structure your house and how you want to structure the work environment and how you want to structure your garden—and recycling and lots of other things—if you basically tried to get the environment to be conducive for good behavior, there's a good chance that good behavior would follow.

DEVIN STEWART: What kind of environment would that be? How would you change it?

DAN ARIELY: The environment could be everything. One trivial example is refrigerators. Lots of people tell me that they have rotten fruits and vegetables in their refrigerator. You spend lots of money on those, and they rot. Why? Because it's in the lower drawer and it's opaque. That's a bad environment. You want fruits and vegetables to be front and center the moment you open the refrigerator. You want the unhealthy stuff to be hidden from sight. This is a tiny effect.

Another thing about the environment. There's a beautiful project called Blue Planet that basically shows that if you adopt a dog, there's a good chance you'll walk for 12 years. Every day you have to walk the dog. If you plant a garden, you have changed your environment.

Another beautiful thing. It turns out that when we eat, if we eat from big plates, we eat much more. If we eat from smaller plates, we eat less. If you change the plate, you eat all of a sudden less.

The moment we understand that the way we make decisions is a function of the environment, now you say, "Let me change the environment to facilitate better decisions." Cut your credit card, think about cash, increase automatic deductions—think about all the things that are happening in your environment. Everything you can automate or make it easy to do is going to help you make better decisions.

DEVIN STEWART: So less automation.

DAN ARIELY: It's not less automation. It's all about making a decision, that the consequence of that decision will stay with you. If you think about something like smaller plates, the moment you have smaller plates, you don't have to think about the amount of food. Just the amount of food every day you would load onto the plate will be slightly smaller and you will eat slightly smaller portions.

Think about automatic deductions from your checking account. If at the end of each month you would think, "How much should I spend and how much should I put into saving?" you would not do it. But you make a decision one time, and that decision can basically escort you for a very long time.

Those are the places that are easiest for us to make decisions, make a one-time move and make that one-time move help us make a very, very long sequence of good behaviors.

So I would focus on those environmental changes we can make, where one decision is going to yield fruit for many, many days and years.

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